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  1. Analysis
April 12, 2012

On the money: Carrefour stays optimistic despite struggles in France

Carrefour CFO Pierre-Jean Sivignon has insisted he expects a series of measures to help improve the retailer's performance after it reported another quarter of falling sales in its domestic market.

Carrefour CFO Pierre-Jean Sivignon has insisted he expects a series of measures to help improve the retailer’s performance after it reported another quarter of falling sales in its domestic market.

Speaking on the firm’s earnings call today (12 April), Sivignon admitted the retailer was not satisfied with its performance in France after its like-for-like sales in France fell 0.3% in the first three months of 2012.

However, he told analysts the drop in sales was a result of the implementation of the group’s “reset plan”, aimed at achieving consistently lower pricing, using more targeted promotions and enhancing its brand product offering.

“As you know, one of the key cogs in that plan is a new commercial mix that shifts away from promotions to focus more on steady pricing,” Sivignon said. “This, admittedly, has had an impact on sales but should gradually lead to an improved performance.”

The world’s second-largest retailer saw like-for-like sales from its hypermarkets in France decrease 3.1% in the first quarter of the year. Supermarket sales, however, rose 1.8%. Sales at other formats, mostly convenience and cash-and-carry stores, climbed 9.8%.

Hypermarkets have long proved a problem format for Carrefour. In February, it announced plans to restructure its hypermarket unit in France, creating three divisions led by a different director. In March, the retailer said it would postpone plans to roll out its new Carrefour Planet hypermarkets after the end of 2012 after outlets that were converted did not perform as well as expected.

Sivignon said it was too early to report on the results of the restructuring. “The reorganisation is quite new and it is way too early to say more. Each of the three managers designated are up and running and in place, but I think it is way too early. This is only a few weeks old and the only thing we will say is, people are in the job, it is in motion.”

However, he said he could see signs of improvement.

“We continue to see progress on several key areas in the first quarter. Firstly we continue to reduce promotions, secondly we have made progress on our gradual overall price positioning in the quarter…and finally, all of our stocks levels have improved and we opened 18 Click and Collect sites in the quarter, more than doubling the total to 35 at the end of March.”

Sivignon told analysts Carrefour was focused on reducing unprofitable promotions at its hypermarkets on a “case-by-case” basis.

“We are investing those [reductions] in pricing for France and we have touched on and started with a staggered impact in a couple of countries in southern Europe also,” he said. “It is having an impact on revenue initially, but we are expecting in the long run for it to have a positive impact on pricing.”

Conlumino analysts, however, were less optimistic about Carrefour’s reset plan and efforts to improve its price positioning in France.

“The signs are that this has yet to have any significant impact. Furthermore with key competitors ramping up their price competitiveness activity, such as Auchan, which only this week launched a new price cutting campaign, Carrefour’s hopes of becoming price leader for staple products will continue to be thwarted by its rivals’ rapid responses,” the analysts noted.

Sivignon, however, sounded an optimistic note, despite acknowledging that Carrefour was operating in what he described as “difficult trading environment”.

“This reinforces our determination to continue with our action plan in France, continue to implement our southern Europe plan…focus on cash and cost efficiency, further expand our Carrefour branded product offering and continue expanding in the emerging markets.”

Carrefour’s share price edged up 0.59% to EUR16.17 at 16:33 GMT today.

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